nick says...

Buy-to-let flourishes in credit crunch

Buy-to-let flourishes in credit crunch

4wallsandaceiling.com Newsletter

Source The Telegraph, Emma Thelwell

Nick Says…

For what it’s worth I think this piece of writing really nails what is going to happen over the next 12 months, within the UK property world.

The killer piece is the last paragraph.

Casualties of the tougher lending criteria applied to mortgages are expected to fall into the welcoming arms of buy-to-let landlords - who could see rental income climb as much as 14pc this year, according to estate agents Knight Frank.

Despite a slew of warnings earlier this year that Britain's love-affair with buy-to-let property could meet a grisly end, with overstretched landlords defaulting on their mortgagees, the market has been healthier than expected as the number of mortgage approvals drop and people turn to renting.

Liam Bailey, head of research at Knight Frank, said: "Buy-to-let activity has remained high, confounding many of the more pessimistic economic commentators, and in many markets investment activity has risen to record levels."
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The news follows the Council of Mortgage Lender's announcement that it expects buy-to-let demand to be the least affected group amid the weakening housing market growth. Buy-to-let will be helped by a fall in the number of people able to secure a mortgage as lenders become more choosy about who they lend to and how much.

Lending figures from the Bank of England this week revealed that new mortgage approvals fell to a two-year low last month.

The CML forecast a 15pc drop in house sales next year, warning that first-time buyers and home movers would be the worst hit. However, their misfortune is likely to strengthen tenant demand and keep rents buoyant.

Property in prime areas of central London, such as Notting Hill and Chelsea, are expected to see rents rise 14pc this year, and a further 9pc in 2008, according to Knight Frank. Overall, the agent sees UK rents rising by 7pc in 2007, and 6pc next year.

The CML said it expects interest rates to fall by 5pc by the middle of next year, which would substantially improve rates of return for investors.

It also pointed out that investor demand may be encouraged by the proposed changes to the capital gains tax rules - a cut in the rate from 40pc to 18pc from next April. However, these changes may push some smaller landlords to realising gains made in recent years.

The CML's report, written by its economists Jim Cunningham and Paul Samter, said: "Although we are relatively optimistic for buy-to-let purchases, a weaker outcome is possible if potential investors expect a weaker prospect for house prices or if the credit crunch continues for longer than we have factored in and restricts the capacity of lenders to serve this market."

Along with the CML, Knight Frank predicted a fall in sales volumes - down 12pc in 2008 - although it still expects average prices in the UK to rise by 6pc this year and 3pc next.

The CML said: "A lack of supply will remain an important factor underpinning prices, but this may not be sufficient to prevent prices from falling modestly in some areas and for some types of property."

Mr Bailey added: "Our current view is that the UK market is likely to enter a weaker phase. The next 12 months will feel a lot like late 2004 and early 2005; a period when price growth slowed to low single digit levels, and more importantly a period when buyers looking to strike deals were met by over-ambitious vendors."

Golf in Cyprus

Golf in Cyprus

4wallsandaceiling.com Newsletter

Source:- ....

Nick Says...

This document really nails the timing aspect of your investment. I have highlighted the passage in question. What this means in reality is you can charge less to get prospects/clients into your property, therefore, you can offer an economic incentive to get your property let.

Cyprus is going to be a golf mecca, but don't forget the other reasons.

Diving. Cyprus has one of the top ten diving sites in the world, the wreck of the Zenobia.
Pilgrimages.  Just situated off the salt lakes, near the airport at Larnaca, is the  Hala Sultan Tekkesi, a shrine to the Auntie of the Prophet Mohammed, who died when she fell off her horse.
Ancient monuments. Etc etc

The trick is to get in there before the end of the year so you can make the best gains and make th emost of the timing.

For any other information regarding Investing in Cyprus please contact me at nick.tadd@4wallsandaceiling.com

Affluent golf lovers are being actively encouraged to invest in the Cypriot property market, it has been reported.

The 7Days news website said that the country's government was planning to build 11 new resorts in order to boost the level of foreign investment.

According to the portal, the aim is to establish the island as a top golfing destination that could compete with markets such as Spain and Portugal.

However, it stated that Cyprus had an advantage its property values were up to 30 per cent lower than those in the rival countries.

"Both the Cypriot government and key developers in Cyprus are recognising that there is a big future for golf on the island," the website continued.

This comes after UK newspaper the Times reported that new leisure facilities were being created as part of an overall strategy to encourage foreign investment.

The publication also stated that the government was also implementing infrastructure improvements and the development of new transport links.

If you are interested in purchasing investment property or your own home in Cyprus, ypu should consider buying this book. It has 31 pages of the most concise information you could ever need when it come to buying property in Cyprus. From the Legal ramifications through to the Banking issues, all of which is complimented by some beautiful photographs of the island.

Available at 4wallsandaceiling.com for only £4.99.

BBC2: The Truth About Property

The Truth About Property

4wallsandaceiling.com Newsletter

NickSays…

Did anyone see that programme on BBC2 last night?

Firstly I think the way in which it was delivered, by Andrew Verity, was quite inspiring, at least he gave an open view albeit a little unsteady in places but open.

Which is very refreshing for a journalist.

The main points that I got out of the programme was the naivety of the chap who sold his house in Hackney for an enormous profit. It just goes to show you that people think they know what they are doing and yet it was just luck that got them there. I’ve been speaking at events now for a number of years and it never ceases to amaze me that there is a huge number of people out there that think they have made a huge amount of money on their house AND THEY THINK THEY ARE THE ONLY ONE’S THAT HAVE!! I’m not knocking the chap from Hackney at least he is trying but it is clear that he needs some guidance.

Speaking of guidance, did you notice there was a lady on the programme who was a full time investor/landlord (forgive me for not remembering her name) and she never said that it was easy to make money out of property, in fact quite the opposite, you do have to work at it. Quite right to, not that it is difficult but the rewards a worth having. In fact I have never come across a ”serious”  investor/landlord that has ever said it was easy… the only people who claim to make it easy are the property clubs.

Right let’s talk about property clubs… hold on let me get my soapbox!

A large number of property clubs offer you “education”, however, think about it. If they profess to educate you as how to become an investor would you have the need to buy property from them? In other words if their business model is to sell you property are they going to teach you to do it for yourself? Somehow I doubt it.

Can we all be clear on something here?  There are no "short cuts", and no "magic fairy dust" to sprinkle around to get a property portfolio for no effort on your part.

The term ‘’armchair investor”- lets be clear about this…THERE IS NO SUCH THING AS AN ARMCHAIR INVESTOR. YOU HAVE TO UNDERSTAND YOUR INVESTMENT FROM ALL ANGLES. THE SALESMAN THAT SOLD YOU THE “INVESTMENT” WILL NOT BE THERE WHEN/IF IT GOES WRONG.

One of the main problems is the trust that naive investors put into the salesman. Think about it, you are just about to sign your name to a large borrowing of money for something you have not seen or understand on the say-so of someone you have only just met. Now ask yourself, is that good?

Check this out, these are genuine people who I know personally: -

Mr. and Mrs. W bought an off-plan apartment through a property investment club.  It was located in a town called Middlesbrough.  On completion, two years later, the apartment was valued at £25,000 LESS than the DISCOUNTED price.  They had to weigh in another £25,000 just to get a mortgage.  They were told by the property club that they could achieve £900 pcm rent for the apartment.  In reality, a local letting agent told them they would be lucky to get £425.00 per month.  The property is still not let out after three months after completion ... the whole block was bought by investors from the same property club.

Mr. N bought an apartment through a property club and eight months after completion, it was still not rented out.  He couldn't understand why as he was assured by the property club that lots of young professionals wanted to rent in the area.  The property was in the North of England, so he drove up to see it.  When he arrived at the apartment, it was suddenly all too clear why it didn't rent out - it was down-wind of a sewage farm and the whole area stank of sh*t.  The whole block had been bought by investors from the same property club and none of them could rent out their flats because there were too many for up for rent.  A real stinker of a deal if ever there was one. 

Miss Y. bought a flat through an investment club.  The flat was bought off-plan in a huge development in Manchester.  Now, four years later, the flat is still not worth what she paid for it four years ago with a 15% discount.

Mr. C, a retired civil servant, bought an apartment in Manchester through a property club and thought he was getting a good deal because it came an alleged discount and a 2 year rental guarantee.  He later found that he had paid £12,000 more for his property than if he had purchased it direct from the developer.  Effectively he was paying his own mortgage for two years, as the price had been over-inflated to accommodate a rental guarantee. 

QUESTION: -
Why would someone offer a rental subsidy?

ANSWER: -
The deal is crap and it does not work in the first place.

Why would you buy something that does not give you a monthly income?

I’ll finish off with this story and this is a belter. We were offered a property the other day that was being marketed in East London and would benefit from “the Olympic regeneration”. “Barking” the salesman said, “was a fantastic place to be, all the benefits of the Olympic regeneration that East London is enjoying.”

When has Barking ever been in East London, my geography tells me that it’s in Essex?

The reality is he was selling a flat for East London prices that was actually in Essex… and some poor sucker will buy it. Alas the salesman still is insisting that Barking is in East London.

Have you ever looked at www.singingpig.co.uk you will find property clubs exposed in their full glory… also notice how some of the threads read like this… THIS THREAD HAS BEEN REMOVED DUE TO AGGRESSIVE LEGAL ACTION BY THE PROPERTY CLUB... hhhmmm I wonder why?

The sad truth is that these property clubs are not regulated by any governing body and therefore answer to no one.

My point is this, if you are going to be involved in property then YOU HAVE TO BE INVOLVED IN PROPERTY and not rely on someone else. It is a good thing in my mind, maybe not for everyone, but it can be done.

If you want to get an education from a company that does not sell property and, therefore, will teach you how to do it for yourself then try Property Mentor (Click here) but it’s only for the people who really want to do this.

OK I’ll get off my soapbox now, if you want to have a chat then please e-mail me at nick.tadd@4wallsandaceiling.com

House prices predicted to rise 27-40% over the next five years

House prices predicted to rise 27-40% over the next five years

4wallsandaceiling.com Newsletter

Source:- Assetz

Nick Says…

Now this just makes sense.

Being the “analytic” person that I am I appreciate facts more than waffle.

I have highlighted a passage towards the end of this piece that carries some weight.

The National Housing Federation published some research recently called Home Truths stating that house prices in the UK will rise by 40% over the next five years to reach £302,400. Although it doesn't state it this is equivalent to a rise of 7% per annum on average which over recent years is a reasonable average but given the good recent run in the last few years I would suggest investors should factor in 4% or 5% average growth for the next five years which might lead to a compounded 27% rise in capital values over the same period. On a typical £200,000 property this would lead to capital growth of £54,000 to £80,000 over the next five years per property.

At the same time the IMF is saying that UK property is overvalued by as much as 40% - we all know however what would happen if property was 29% cheaper (the equivalent of 40% over valuation) - there just wouldn't be enough property to go round with the level of demand this would provoke. The rules of economics governing supply and demand in a free market would dictate that it would be impossible to prices to reach this low level before increased demand stabilised prices. We saw a similar effect between the summers of 2004 and 2005 and at the first sign of price weakness increased demand began to drive prices upwards again.

Interest rates are expected to lower in the UK imminently and strong further reductions are expected in the US and doubtless elsewhere in the world over the next six months to a year - the risk to the growth projections and to our statement that UK property is not overvalued does depend upon interest rates not going up dramatically. Given the relatively muted response in the mortgage markets to the recent credit crisis it is likely indeed that rates will lower, property is not overvalued and we are likely to see significant growth in years to come driven by the inability of the housebuilders through planning constraints to build enough property for the demand present in the UK economy.

Property Management/Tax software

This is the Property Management/Tax software we use.

I've mentioned in the past you should always have complete and utter electronic control over a growing or fledgling Portfolio. We have set up a special offer with Property Tax Portal. If you purchase the software through 4wallsandaceiling.com you will get a 5% discount plus a FREE BONUS BOOK worth £44.99 called "Pay less Property Tax"... your typical night time reading... joking aside, it is a good one and something you WILL use.

This is what they say...

"This unique piece of software will allow the property investor and landlord to proactively take on the challenges:

• ... to manage and track properties/tenants and all associated income & costs
• ... to pay the correct and minimal amount of tax
• ... to make informed investment decisions, so that you know exactly how well your properties are performing.

How will landlord property tax manager benefit me?

Landlord Property Tax Manager is an easy to use and powerful piece of software that is guaranteed to save you time, money and effort when it comes to managing your properties. "

...and they're right it does solve a problem we all have to deal with very efficiently. This product will be useful and well worth looking into.

Click here to read a bit more... or e-mail me at nick.tadd@4wallsandaceiling.com

Click here to order your copy.

House price index October 2007

Click Here for House price index October 2007

 

Nick Says...

Click on the above for the latest House Price Index, courtesy of Rightmove.

 

Nick Says...

Click on the above for the latest House Price Index, courtesy of Rightmove.

Buy-to-let set to push up prices

Buy-to-let set to push up prices

4wallsandaceiling.com Newsletter

Source:- the Surrey Advertiser

Nick says…

More compelling information…

Experts fear there won’t be enough affordable housing in the future.

AVERAGE house prices in Surrey are likely to smash through the half-a-million pound barrier in the next five years, according to a new report.

Experts have predicted that investors buying homes to rent will inflate prices in the county by 50% by 2012.

Currently, buyers must pay almost 14 times their annual wage to get on the property ladder. The average cost of a home in the county is £335,000.

This means to get a mortgage for an average home, the household income needs to be about £90,000.

The report, entitled Home Truths: The Real Cost of Housing 2007-2012, has been published by the National Housing Federation (NHF), which represents housing associations and registered social landlords across the country.

The body has said the drastic shortfall in the number of new properties will mean house inflation will outstrip income growth by a huge margin.

This, it says, will create huge wealth inequalities between the “haves and the have-nots”, and will “distort society” in the South East.

It blamed the problems of supply on the buy-to-let market, and suggested an increasing number of homes are not lived in by the owner.

Authors also criticised nimbys and called on local authorities to tackle the problem head on.

Warren Finney, South-East regional manager for the NHF, said: “More and more people are buying houses but do not use them as their own homes.

“Properties can stay empty for a considerable amount of time. It is not really demand because people are not living in them. This has pushed up prices and uses up the capacity of building.”

He said empty properties could cause problems with squatting and with developing sustainable communities, and called on higher council tax for owned empty properties.

Mr Finney warned the problems would worsen in rural areas, which he feared could be turned into ghettos of elderly people.

“You will end up converting them into a retirement community because only the older people with housing can afford to live there,” he said.

Derek Cash, the federation’s head of south region, said: “Surrey is experiencing a rapidly escalating housing crisis, with waiting lists almost tripling in the last five years. We are simply not building enough homes to meet demand.

“But local and regional political support for housebuilding campaigns is also required in order to deliver the homes the South East so desperately needs. Communities should also support planning applications, which will offer a lifeline to youngsters who want to live in their own area by providing rented and shared ownership housing.”

Although the latest housing green paper from central government was welcomed, the NHF said this would produce only 80% of needed homes. It would take 29 years at current rates of building to give every family on the 195,000-strong social housing list a home.

Jeff Holderness, head of housing advice at Guildford Borough Council, said the authority worked to keep families off the streets.

This included intervening with landlords to prevent evictions, supporting vulnerable families, and assisting with rent deposits.

He said the authority has 3,700 families and individuals on its housing register, who could wait for up to three years for a home.

He added the borough has attracted some £8 million to plough into social housing, which will result in another 900 affordable homes being built

First printed in: Surrey Advertiser

Mortgage rejections up 60 per cent

Mortgage rejections up 60 per cent

4wallsandaceiling.com Newsletter

Source:- The Times Online, Ali Hussain

Nick Says…

Does this sound like an opportunity or what?

The media would have it that this is a “disaster” usually followed by the hallowed words “crash”.

I suppose that’s where education comes in.

To me it would seem logical that I can step in and “help the builder out”. As it turns out we, at 4wallsandaceiling.com, have been in-undated with deals over the last few weeks from builders that have sold houses only to be let down due to financial products being “pulled” from the original buyer. In fact we’ve got too many to see through at the moment… nice problem to have though.

If you want to get involved with 4wallsandaceiling.com please e-mail me at nick.tadd@4wallsandaceiling.com

The number of rejected mortgage applications has increased by 60 per cent in the past six months.

More than 738,000 home loans were turned down by mortgage firms since March as banks and building societies enforce stricter lending conditions, according to research by analysts MoneyExpert.com.

The research confirm earlier figures released by the Council of Mortgage Lenders which showed lending for house purchases and remortgages have declined by 11 per cent and 12 per cent respectively compared with August last year.

In the six months to March, figures showed that around 463,000 people had a mortgage application rejected. This figure has since risen to 738,000 in the six months to October as Bank of England interest rate rises hit borrowers.

Five Bank of England rate rises have been pushed through since August 2006, with two coming since May 2007, pushing the base rate from 4.5 per cent to 5.75 per cent and adding around £1,320 to the annual cost of a typical £150,000 variable rate repayment mortgage.

Applicants aged between 25 and 34 were worst affected according to the research. Around four per cent of people in this age bracket have had an application turned down – around 382,000 young mortgage applicants.

Since March this year, the percentage of people classed as a “first time buyer” has also dropped by 20 per cent, according to the comparison firm Moneysupermarket.com.

The site suggests the prevalence of buy to let landlords and rising immigration resulting in a dwindling pool of properties may be behind the sharp decline.

The research also shows that homeowners are increasingly turning to fixed rate deals of between one and five years – 48 per cent of borrowers are on a fixed rate mortgage of between one and five years, compared to 39 per cent in March this year.

Sean Gardner, Chief Executive of MoneyExpert.com, said: “Life is tough at the moment if you’re applying for a mortgage. The financial environment is far more stringent than in the summer of last year and people need to be prepared for rejection.”

He added that it was up to the applicant to convince their bank that they can cope with repayments.

Buy-to-let landlords are enjoying the fastest rent rises on record,

It’s going rental
Buy-to-let landlords are enjoying the fastest rent rises on record,

4wallsandaceiling.com Newsletter

Source:- The Times Online

Nick Says…

Fantastic. There’s always an up-side to the markets.

RISING interest rates may have taken their toll on rental yields, but across the country the outlook for buy-to-let landlords is brighter. Lettings agents are reporting soaring renewals, falling voids and galloping rental growth. The latest lettings survey by the Royal Institution of Chartered Surveyors (RICS) reveals that rents are rising at their fastest pace since surveys began in 1998. London is particularly buoyant. “Central London residential rental value growth has hit a new high,” says Neil Chegwidden, head of research at Cluttons. “Rental values are rising by 15 per cent per annum – this is only the second time in the past 20 years that annual rental value growth has hit double figures.”

Why are rents rising so fast? It’s a question of supply and demand: figures from the Association of Residential Lettings Agents (Arla) show that tenant demand now outstrips supply in all areas of the rental market. Even in cities such as Leeds that have been afflicted by problems of oversupply, tenant demand is catching up. Families whose homes were made uninhabitable by the floods in cities such as Hull are also looking for accommodation. In London, 65 per cent of Arla agents say that there are now more tenants available than properties. Competition for prime rental properties can be so fierce that some flats are attracting sealed bids – unheard of in the rentals market until recently. “Areas such as Clerkenwell, Barbican and Bloomsbury are attracting a high proportion of sealed bids,” says Kari Trajer, of Hurford Salvi Carr.

Gazumping is another trend that has filtered over from sales to lettings. “We have noticed people getting gazumped on lettings properties, with landlords expecting tenancy bids of over the asking price,” says Sandy Armstrong at Oakhall Property Source. “We have heard of tenants paying 20 per cent over asking price for a rental property.”

What is driving demand? “Demand for rental properties mainly comes from young couples and frustrated first-time buyers,” says Stuart Allan of Broadley & Coulson in Bishop Auckland. Tim Hyatt, of Knight Frank, adds: “The recent turmoil in the financial markets has meant quite a lot of people are putting decisions on hold.” Lucy Russell, of the high-end estate agency Quintessentially Estates, has one client who has sold his £3.5 million home to move into rented accommodation for a year, because he believes the market is set to drop significantly.

A shortage in the sales market is also having an impact. “Tenants that would have left the market to buy are staying put because they just can’t find the right house,” says Trajer. Migration from eastern Europe remains a huge factor for lettings across the country, while relocations from western Europe to London have transformed the normally quiet summer market. “August was exceptionally busy, with families relocating from France, Italy and Spain,” says Dairin Garnier, of Henry & James, which covers London’s more exclusive postcodes.

Are more landlords coming into the market? Buy-to-let landlords are continuing to invest in the market, but in some areas the supply of private rented housing is falling. RICS figures show that the percentage of landlords selling their properties at the expiry of the tenant lease rose to 6 per cent. “In the first four months of this year we lost 15 per cent of our stock to the sales department,” says Hyatt.

What sort of properties are most in demand? The top end of the market is flourishing. In Winchester, Dreweatt Neate is asking £6,000 a month for the Inner Close, in the grounds of Winchester Cathedral. In London, EA Shaw is asking £3,000 a week for a two-bedroom flat on King Street overlooking the Covent Garden piazza, while Henry & James has a three-bedroom property in Cadogan Square, Knightsbridge, for £2,250 a week.

Despite the recent problems in the stock markets, demand from corporations is healthy. “Demand from the City continues to be strong,” Chegwidden says. “There have been reports of banks freezing new recruitment and even laying off staff, but this has not had any notable impact on the Central London lettings market to date.”

In those parts of the country affected by flooding, demand for larger properties has soared. “Widespread storm damage and flooding during late June has caused unprecedented demand, especially for family accommodation,” says Glen Wellbourne, of Larards Lets in Hull. “As a knock-on effect, the oversupply of city-centre flats has also diminished.”

For the latest market news and ideas on how to boost your buy-to-let returns go to timesonline.co.uk/investmentproperty

FACTFILE

In prime Central London, the average rent for a house is now £819 a week; for a flat it is £525 a week. In the South East, rents for houses average £345 a week, and for flats £215.

In the rest of the UK, rents average £230 a week for a house and £150 for a flat.

The average capital asset value of rented houses has risen by 3.3 per cent during the past quarter. Prime London prices rose by 0.3 per cent, however, compared with 7.3 per cent in the rest of the South East.

The average void rate has fallen from 31 days in the winter of 2003/4 to 23 days this summer.

Beware builders’ mortgage deals

Beware builders’ mortgage deals

Housebuilders are are so keen to sell they will pay some of the mortgage to shift surplus stock

4wallsandaceiling.com Newsletter

Source :- The Telegraph

Nick Says…

It’s all coming true but who’s got the bottle to see it through?

We’ve been picking up some great deals of late, in the house market, something that we have been predicting for a long time. However, the most poignant thing about this piece of writing is that it stresses the over supply of flats/apartments coupled with the fact that lenders are losing confidence in them. (I have highlighted the passage of writing)

It seems to me, therefore, that property clubs selling off-plan “deals” on apartments are going to struggle to get their clients reasonable mortgage products… not to mention whether or not the valuation will come in at the property club's gross price.

HOUSEBUILDERS are offering to pay half your mortgage for up to two years as they struggle to get properties off their books, in the latest sign that the housing market is at a turning point.

Surveyors said last week that house prices fell for the second month in a row in September, at their fastest pace for two years.

Meanwhile, Capital Economics, the consultancy, said it now expected house prices to drop 3% next year and by the same amount the following year.

The firm has been bearish before and has had to recant, but it thinks there are finally signs the housing market is undergoing a meaningful slowdown following five interest-rate rises in a year - not to mention the desperation of housebuilders.

Barratt Developments, one of Britain’s largest housebuilders, is offering buyers a mortgage rate of just 3%, just weeks after saying sales had tumbled by 10% after the Northern Rock crisis.

The deal is available on mortgages up to £350,000 and borrowers must put down a deposit of at least 10% and take a two-year fixed-rate deal. Assuming you borrow 5.8%, on an interest-only basis, monthly payments on £350,000 would be £1,692. Barratt would pay 2.8%, or £817 of that, each month, saving a buyer £19,608 in the first two years.

David Bexon at Smartnewhomes, a property site, said: “All housebuilders are having to work a lot harder to sell properties and I expect to see more incentives on offer over the coming months. The housing market is weakening and many of these developers have financial years which end in December, so they will need to shift units quickly.”

Barratt is not the only developer offering such deals. Persimmon will pay up to £500 a month towards mortgage costs for the first two years, and Wimpey offers up to £600 a month. Firms will also contribute to deposits, cover some of the stamp duty and even offer part exchange if you cannot sell your home in time.

However, buyers should be careful as there are concerns that new-build properties will be hardest hit by a downturn.

Matthew Wyles at Nationwide said: “These incentives aren’t acts of charity. When you see developers offering big incentives it is a sign that they have significant amounts of unsold stock. Buyers therefore have to find out what the property is really worth and make sure they are getting good value for money.”

New-build properties tend to be sold at a premium of up to 15% to older properties. When house prices are rising strongly, as they have been in recent years, this is not an issue, but if prices stagnate or fall, you may find you struggle to sell the property for more than you paid for it.

Many economists believe the annual rate of growth will slow from more than 10% now to about 4% next year, and some new-builds are already falling. The average asking price of new-builds fell by 1.1% in August, according to Smartnewhomes.

Many analysts believe one and two-bedroom flats are at risk, particularly those in provincial city centres such as Newcastle, Leeds and Nottingham where huge levels of development have resulted in oversupply. Two-bedroom flats in Brook Court, Radford, Nottingham, are on the market for £89,950, but were being sold for £139,000 this time last year.

The Mortgage Works, part of Nationwide, stopped offering buy-to-let mortgages for new-build flats in 2005, and UCB Home Loans, Nationwide’s other buy-to-let lender, has also pulled out of this part of the market.

Other lenders now require larger deposits. GMAC, for example, will only lend up to 75% of a property’s value – down from 90%. It has also changed its definition of new-build from properties built in the past 12 months, to those built in the last two years.

West Bromwich requires all borrowers looking for a new-build flat to have a deposit of at least 25%. Previously, the minimum was 5% on residential loans and 15% on buy-to-lets.

James Cotton at L&C Mortgages, a broker, said: “Lenders are becoming more cautious about advancing loans on new-build properties. Some want borrowers to put down larger deposits in case prices fall.”

Surveyors are also becoming more conservative. Robert Bryant Pearson at Allied Surveyors said: “Given the state of the market, the figures valuers will be putting on new-build properties will be more cautious. I think things will get worse for a lot of one and two-bedroom flats because a disproportionate number have been built. There will be people who have bought in the last few years who will be in negative equity, where the value of their outstanding mortgage is greater than that of the property.”